Struggling regional lender New York Community Bancorp (NYCB) lost $327 million in the first quarter, but its shares rose in pre-market trading as its new CEO outlined a “clear path to profitability over the next two years.”
The net loss was due in part to increased provisions for future loan losses. These amounts rose to $315 million, compared to $170 million in the same period last year.
However, it decreased from $552 million in the fourth quarter.
The Commercial Bank of New York is one of the largest lenders to rent-regulated office buildings and apartment complexes, especially in New York City.
Its stock has fallen more than 70% since the start of 2024, but rose more than 20% in pre-market trading on Wednesday as CEO Joseph Otting pledged that New York Commercial Bank would achieve “significantly higher profitability and higher capital levels” by 2026.
“Although this year will be a transitional year for the company, we have a clear path to profitability over the next two years,” he said in a statement.
Otting, the former acting Comptroller of the Currency, leads a new team formed this spring after a $1 billion infusion from a group that includes former Treasury Secretary Steven Mnuchin.
The infusion and executive reshuffle were attempts to restore stability to a regional bank that began to wobble on Jan. 31 when it surprised analysts by cutting its dividend and allocating more to loan losses.
The turmoil intensified after it revealed weaknesses in its internal controls, and a tenfold increase in its losses in the fourth quarter to $2.7 billion.
Its struggles intensified new fears that growing vulnerabilities in commercial real estate could spread through other banks, and came nearly a year after the downfall of Silicon Valley Bank and Signature Bank, takeovers in March 2023 that sparked widespread panic among depositors.
New York Commercial Bank acted as a savior last year, seizing $38.4 billion of Signature Bank's assets from US regulators.
But that pushed its private assets above $100 billion, a key minimum that would mean tighter scrutiny and tougher standards from regulators.
The company revealed on Wednesday that its deposits decreased by about $7 billion during the first quarter, from $81.5 billion to $74.8 billion. Its deposits reached $83 billion on February 5.
This spring, his bank began offering a CD account with a 5.55% annual yield, one of the highest in the country.
New York Commercial Bank explained that other challenges remain ahead, including more loan loss provisions and challenges among borrowers.
It wrote off $81 million in bad loans during the first quarter.
in Power pointthe bank estimated that earnings per share on a diluted basis will be -$0.50 to -$0.55 in 2024 due in part to setting aside up to $800 million for future loan losses – before turning positive in 2025.
“We expect an elevated level of loan loss provisions over the remainder of 2024 in relation to the potential for market and interest rate conditions to impact borrower performance in certain portions of our loan portfolio,” Otting said in the statement.
David Hollerith is a senior reporter at Yahoo Finance covering banking, cryptocurrency, and other areas of finance.
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